The Isle of Man is a jewel in the Irish Sea, and while there is competition in the global nondomicile space, new legislation provides a golden opportunity for HNWs, writes Paul Hotchkiss
There are many countries out there vying to attract wealthy individuals to relocate. Current favourites include Portugal, which has its ‘non-habitual resident’ regime whereby only Portuguese-source income is taxed.
Almost all foreign incomes are tax-free. There is also the UK resident non-domicile regime and the Swiss Forfait, and in 2017 Italy introduced a new tax regime requiring a lump sum payment of €100,000 per annum for non-Italian income, broadly, to be exempt from tax.
There is great competition in this space, and the lengths to which countries are willing to go to attract the wealthy shows no sign of abatement. What all these regimes have in common is that they involve some sort of payment or relinquishment of rights. However, the Isle of Man has recently presented a more desirable option for HNW families and investors, which is genuinely the best-kept secret in Europe.
On 18 February 2020, the Isle of Man Treasury brought a little known or used concession into legislation. The new Special Treatment for Key Employees means that if an employment is taken up by a new Isle of Man resident which is in the interests of the economy, the employee will be exempt from a number of taxes for three years: inheritance, wealth, capital gains, gift and income. Additionally, there will be no restrictions on access to the Isle of Man’s double tax treaties or any of the usual benefits all residents enjoy.
Plus, there will be free remittance of all income and capital gains from all sources. Importantly for HNWs, the only tax they will have to pay is limited to income derived from local employment, as well as gains from land and property on the Isle of Man. However, the rates are still relatively low: the upper tax rate is at 20 per cent and is capped at £200,000 per annum.
In my experience, most wealthy individuals are serial entrepreneurs at heart and starting or expanding businesses is in the blood. Why not combine this appetite for entrepreneurship with the benefit of this new tax break? Of course, the new legislation requires HNWs to be employed or at least assume the role of the director of a company. Any new business could be a start-up or the expansion of an existing business.
For those who want to manage their family wealth on the Isle of Man rather than create a ‘traditional’ business per se, it must not be forgotten that such a ‘new business’, for this new tax treatment, can include the setting-up as well as the transfer of a family office to the Isle of Man: it does not matter which.
The Isle of Man is a jewel in the Irish Sea, and while there is competition in the global nondomicile space, the new legislation provides a golden opportunity for HNWs and their families to relocate or do business on the Island.
Not only is it a beautiful and relaxed place to live, it also has a vibrant and international business community, with something for everyone. So don’t overlook it – it really is a ‘home from home’ with huge benefits.
Paul Hotchkiss is the owner and managing director of Hotchkiss Associates Isle of Man
The information within this article is general in nature and does not constitute legal advice. You should seek professional advice specific to your individual circumstances.
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